<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________
Commission file number 1-9051
[TRANSCISCO LOGO]
TRANSCISCO INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2989345
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
601 California Street, Suite 1301
San Francisco, CA 94108
(Address of principal executive offices) (Zip Code)
(415) 477-9700
(Registrant's Telephone Number,
including area code)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [x] NO [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES [x] NO [ ]
Indicate the number of common shares outstanding, as of the latest practicable
date.
Class Outstanding at August 1, 1996:
Common Stock, $.01 par value 5,412,725 (excludes 794,390 shares
held in Treasury)
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ITEM 1. PART I -- FINANCIAL STATEMENTS
FINANCIAL STATEMENTS TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
June 30 March 31
1996 1996
---------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,752 $ 2,695
Accounts receivable 6,706 6,377
Inventories 2,361 2,501
Other current assets 656 574
-------- --------
Total current assets 11,475 12,147
Property and equipment, net
of accumulated depreciation 14,497 14,606
Investment in SFAT 18,466 17,214
Other assets 74 79
-------- --------
$ 44,512 $ 44,046
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 3,656 $ 3,743
Accrued compensation and benefits 1,152 1,968
Other current liabilities 1,950 2,899
Current portion of long-term debt 382 382
-------- --------
Total current liabilities 7,140 8,992
Senior secured debt 1,958 2,061
Subordinated debt 1,500 1,500
Other long-term liabilities 2,863 2,861
Deferred maintenance liability 3,290 2,872
Commitments and contingencies
Shareholders' equity:
Common Stock $.01 par value
15,000,000 shares authorized,
issued and outstanding, 6,064,681 at June 30,
1996 and 6,064,004 at March 31, 1996 53 53
Paid-in capital in excess of par 17,747 17,747
Retained earnings 13,475 11,474
Less cost of 794,390 common shares in treasury (3,514) (3,514)
-------- --------
Total shareholders' equity 27,761 25,760
-------- --------
$ 44,512 $ 44,046
======== ========
</TABLE>
2
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
June 30
---------------------------
1996 1995
---- ----
(restated)
<S> <C> <C>
Revenues $ 10,277 $ 10,835
Costs and expenses:
Operations and support 7,926 8,399
Selling, general and administrative costs 1,649 1,500
Interest (income) (19) (34)
Interest expense 108 460
Other (income) expense (14) 18
----------- -----------
9,650 10,343
----------- -----------
Income from operations before equity in the
earnings of SFAT and tax provision 627 492
Equity in earnings of SFAT 1,377 1,001
Provision for income tax (3) --
----------- -----------
NET INCOME $ 2,001 $ 1,493
=========== ===========
NET INCOME PER SHARE $ 0.30 $ 0.27
=========== ===========
Shares used in calculations of per share amounts 6,615,091 5,460,630
</TABLE>
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TRANSCISCO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------
1996 1995
---- ----
(restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,001 $ 1,493
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in earnings of SFAT (1,377) (1,001)
Interest payable -- 208
Depreciation and amortization 246 302
Common stock issued for services -- 413
Changes in operating assets and liabilities:
Accounts receivable (329) (1,461)
Inventories 140 114
Other current assets (82) (199)
Other assets 5 (86)
Accounts payable (87) 796
Accrued compensation and benefits (816) (305)
Deferred maintenance liability 418 664
Other current liabilities (824) 534
Other long-term liabilities 2 --
------- -------
Net cash provided by (used in)
operating activities (703) 1,472
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (137) (372)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on senior debt (103) (397)
Payments on short term borrowings -- (66)
------- -------
Net cash used in financing activities (103) (463)
------- -------
Net increase (decrease) in cash and cash equivalents (943) 637
Cash and cash equivalents at beginning of period 2,695 1,371
------- -------
Cash and cash equivalents at the end of period $ 1,752 $ 2,008
======= =======
</TABLE>
4
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TRANSCISCO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
BASIS FOR PRESENTATION.
The accompanying unaudited financial statements have been prepared in accordance
with generally accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ended March
31, 1997. For further information, refer to the financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended March 31, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARISON OF THE COMPANY'S OPERATING RESULTS FOR THE THREE MONTHS ENDED
JUNE 30, 1996 AS COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1995
REVENUES.
Revenue for the Company during the three month period ended June 30, 1996 was
$10.3 million, versus $10.8 million in the comparable three month period of
1995. The decrease in revenue was primarily a result of a reduction in program
repair work at Transcisco Rail Services Company (TRS). This decline in revenue
was buffered to some extent by an increase in revenue at Transcisco Leasing
Company (TLC), whose revenues expanded as a result of growth in the number of
railcars under long term management and maintenance contracts.
OPERATIONS AND SUPPORT EXPENSES.
Operation and support expenses include the cost of direct and indirect labor,
materials and overhead costs associated with the repair and maintenance of
railroad rolling stock. Operations and support expenses for the quarter ended
June 30, 1996 decreased to $7.9 million from $8.4 million in the comparable
period of 1995. The decrease was primarily a result of lower direct labor and
material costs at TRS caused by a reduction in the volume of program repair
work.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.
Selling, general and administrative expenses include the sales, finance, human
resources, legal, purchasing and administrative operations of the Company. These
expenses increased to $1.6 million for the quarter ended June 30, 1996 from $1.5
million in the same period of 1995. This increase was caused by higher personnel
and marketing costs, principally at TLC as a result of growth in its managed
railcar fleet.
EQUITY IN EARNINGS OF SFAT.
Transcisco Trading Company, a wholly-owned subsidiary of the Company, owns 23.5%
of SFAT, Russia's leading private rail transportation company. Under the equity
method of accounting, the Company accounts for its portion of SFAT's net income
as "equity in earnings of SFAT."
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Since a portion of the Company's earnings are derived from its share of SFAT's
net income, the Company's future results may vary in accordance with changes in
SFAT's results. Management cautions that SFAT's earnings may fluctuate from
quarter-to-quarter and from year-to-year as a result of several factors,
including the timing of railcar assembly orders, the volume of tariffs collected
by SFAT on behalf of the Ministry of Railways and the general volume of goods
transported via railway. SFAT's quarterly results should not be considered an
indication of annual results.
As with other companies conducting business in developing nations, the Company's
investment in SFAT is subject to certain business, financial and political
risks. Although Russia's economy has shown signs of improvement, there is no
assurance this improvement will continue. If Russia's economy deteriorates, the
financial performance of SFAT and, as a result, of Transcisco, may be adversely
affected.
NET INCOME.
Net income for the quarter was $2 million, or $0.30 per share. For the
comparable quarter of 1995, net income was $1.49 million, or $0.27 per share.
The increase in net income was a result of several factors, including higher
profitability at TLC, resulting from the growth in its railcar fleet under
management. In addition, the Company's equity in the earnings of SFAT increased
as a result of continued growth in SFAT's railcar fleet and volume of
petrochemicals shipped.
LIQUIDITY AND CAPITAL RESOURCES.
The ratio of current assets to current liabilities was 1.61 to 1.0 at June 30,
1996 compared to 1.35 to 1.00 at March 31, 1996. Working capital increased by
$1.2 million as a result of higher earnings and an increase in the Company's
deferred maintenance liability, which was the result of lower maintenance
expenses incurred versus maintenance revenues received.
For the quarter ended June 30, 1996, the Company's cash flow from operating
activities showed a deficit of $703,000, versus a positive cash flow from
operating activities of $1,472,000 for the comparable period of 1996. The
reduction in cash flow from operating activities was primarily a result of
higher employee bonus payments and a drop in unearned revenue resulting from a
large customer revenue prepayment in the fourth fiscal quarter of 1996.
The Company's cash requirements were satisfied primarily through cash on hand,
operating earnings and revolving loans. The current revolving loan is provided
through Transamerica Business Credit Corporation, and has a maximum limit of
$7,835,000. There were no borrowings under this revolving loan at June 30, 1996.
The loan is collateralized by the Company's accounts receivables and inventory,
subject to certain reserves and eligibility terms. Based upon the Company's
level of inventory and accounts receivable, coupled with the revolving loan's
eligibility requirements, the net availability of funds under the facility was
approximately $2 million as of June 30, 1996. Management believes its present
cash balance, availability of working capital from the loan facility, and
attainment of projected cash flow should be sufficient to meet the Company's
working capital requirements for at least the next 12 months.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION - MERGER
On June 17, 1996, the Company entered into an Agreement and Plan of Merger (the
"Agreement") with Trinity Industries, Inc. ("Trinity"). Under terms of the
Agreement, and subject to shareholder and regulatory approvals, a wholly-owned
subsidiary of Trinity will merge with Transcisco through the exchange of shares
of common stock of Trinity for 100 percent of the issued and outstanding shares
of common stock of Transcisco.
6
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The Agreement provides that each share of Transcisco's outstanding common stock
will be exchanged on a tax-free basis for .1884 of a share of Trinity's common
stock. Based on the July 22, 1996 closing price of $32.5 per share of Trinity's
stock, the transaction would have a value of approximately $42 million. The
stock exchange ratio is fixed.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of the Report:
Exhibits:
2.1 Agreement and Plan of Merger among Trinity Industries, Inc.,
Trinity Y, Inc.,and the Company dated June 17, 1996,
incorporated herein by reference to the Company's Form 10-K
for the fiscal year ended March 31, 1996.
3.1 Joint Plan of Reorganization, incorporated by reference to
Form 8-A filed by the Company on August 12, 1993.
3.2 Amended and Restated Certificate of Incorporation of
Transcisco Industries, Inc., incorporated by reference to Form
8-A by the Company on August 12, 1993.
3.3 Amended and Restated By-Laws, incorporated by reference to
Form 8-A filed by the Company on August 12, 1993.
4.1 Form of Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock of Transcisco
Industries, Inc., incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended March 31, 1996.
10.1 Lease Agreement for 601 California Street, incorporated herein
by reference to Company's filing of Form 10-K for December 31,
1988, filed with the Securities and Exchange Commission.
10.2 Transcisco Industries, Inc. Amended and Restated (1994) Stock
Option Plan (including implementing agreement: Transcisco
Industries, Inc., Stock Option Agreement) incorporated herein
by reference to Form S-8 filed April 13, 1995 with the
Securities and Exchange Commission.
10.3 Plan and Agreement of Reorganization, incorporated by
reference to the Company's Registration Statement on Form S-4
(Reg. No. 33-2236) dated December 23, 1985, filed with
the Securities and Exchange Commission.
10.4 Employment Agreement between TRS and Mr. Robert A. Jahnke,
dated April 13, 1995, incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended March 31, 1995.
10.6 Transcisco Industries, Inc. Directors' (1994) Stock Option
Plan, incorporated by reference to the Company's Form S-8
filed April 8, 1995 with the Securities and Exchange
Commission.
10.7 Employment Agreement, as amended, dated May 1, 1995 between
Mr. William F. Bryant and Transcisco Leasing Company, a
subsidiary of Company, incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended March 31, 1995.
7
<PAGE> 8
10.8 Agreement between Deucalion Securities, Inc., and Steven L.
Pease and the Company dated January 3, 1995, incorporated
herein by reference to the Company's Form 10-K for the fiscal
year ended March 31, 1995.
10.9 Amendment dated March 1, 1996 to the Agreement between
Deucalion Securities, Inc., and Steven L. Pease and the
Company dated January 3, 1995, incorporated herein by
reference to the Company's Form 10-K for the fiscal year ended
March 31, 1996.
10.10 The Note and Warrant Purchase Agreement Among the Company,
Transcisco Rail Services Company, Transcisco Leasing Company,
and Transcisco Trading Company and Furman Selz S.B.I.C., L.P.
and James Dowling dated as of August 1, 1995 is incorporated
herein by reference to the Company's Form 8-K filed on October
6, 1995.
10.11 The Registration Rights Agreement by and between the Company,
Furman Selz S.B.I.C., L.P., and James Dowling dated August 1,
1995 is incorporated herein by reference to the Company's Form
8-K filed on October 6, 1995.
10.12 The Loan and Security Agreement between the Company,
Transcisco Rail Services Company, Transcisco Leasing Company,
Transcisco Trading Company, and Transamerica Business Credit
Corporation, dated as of July 31, 1995 is incorporated herein
by reference to the Company's Form 8-K filed on October 6,
1995.
10.13 The Shareholder Rights Plan by and between the Company and
First Interstate Bank of California, as rights agent, dated
September 5, 1995, is incorporated herein by reference to the
Company's Form 8-A filed on September 15, 1995.
10.14 Letter Agreement by and between the Company and Mark C.
Hungerford dated July 1, 1995, incorporated herein by
reference to the Form S-3 dated February 7, 1996.
10.15 Agreement and Plan of Merger dated June 17, 1996 among Trinity
Industries, Inc., Trinity Y, Inc., and the Company.
10.17 The Company's Stock Purchase Plan incorporated by reference to
the Company's Form S-8 filed April 8, 1995 with the Securities
and Exchange Commission.
10.18 Amendment dated June 17, 1996 to the Rights Agreement by and
between the Company and Wells Fargo Bank National Association
(formerly First Interstate Bank of California), dated
September 5, 1995, incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended March 31, 1996.
21.1 List of subsidiaries of the Company, incorporated herein by
reference to the Company's Form 10-K for the fiscal year ended
December 31, 1993.
23.1 Consent of Independent Auditors regarding the Company's
consolidated financial statements filed as part of the
Company's Annual Report on Form 10-K for the year ended March
31, 1996, incorporated herein by reference to the Company's
Form 10-K for the fiscal year ended March 31, 1996.
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23.2 Consent of Independent Auditors of SFAT regarding the
Company's consolidated financial statements, insofar as they
relate to SFAT's financial statements, filed as part of the
Company's Annual Report on Form 10-K for the year ended March
31, 1996, incorporated herein by reference to the Company's
Form 8-K filed July 26, 1996.
27.0 Financial data schedule.
99.1 JSC SFAT Consolidated Financial Statements for the years ended
December 31, 1995 and 1994 with Independent Auditors' Report
thereon, incorporated herein by reference to the Company's
Form 10-K for the fiscal year ended March 31, 1996.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1996.
TRANSCISCO INDUSTRIES, INC.
August 7, 1996 /S/ GREGORY S. SAUNDERS
Date Gregory S. Saunders - on behalf of the
Registrant and as Vice President, Controller
9
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,752
<SECURITIES> 0
<RECEIVABLES> 6,706
<ALLOWANCES> 0
<INVENTORY> 2,361
<CURRENT-ASSETS> 11,475
<PP&E> 14,497
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,512
<CURRENT-LIABILITIES> 7,140
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 27,761
<TOTAL-LIABILITY-AND-EQUITY> 44,512
<SALES> 10,277
<TOTAL-REVENUES> 10,277
<CGS> 7,926
<TOTAL-COSTS> 7,926
<OTHER-EXPENSES> 1,616
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108
<INCOME-PRETAX> 2,004
<INCOME-TAX> 3
<INCOME-CONTINUING> 2,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,001
<EPS-PRIMARY> .30
<EPS-DILUTED> 0
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